Phoenix Overseas Limited — Credit Ratings, 27-11-2024: Credit Rating

Acuité has reaffirmed the long-term rating of ‘ACUITE BBB-’ and the short-term rating of ‘ACUITE A3’ for Phoenix Overseas Limited's bank facilities totaling ₹60.00 crore. The outlook remains stable.

The company reported an operating income of ₹548.37 crore in FY2024, reflecting a 22% growth from ₹450.97 crore in FY2023, driven primarily by increased exports of its traded goods. However, the EBITDA margin has shown a slight decline to 2.23% in FY2024 from 2.58% in the previous year, attributed to political disruptions in Bangladesh affecting operations, which resulted in a reduced operating profit margin of 1.76% in H1FY25. Net profit increased to ₹5.39 crore in FY2024 from ₹3.72 crore in FY2023, yielding a PAT margin of 0.98%.

In terms of operational efficiency, the gross current asset (GCA) days improved to 65 days from 98 days, indicating effective working capital management. However, debtor days increased to 32 days from 26 days, indicating some collection delays. The company maintains a moderate financial risk profile with low gearing at 0.61 times and a healthy interest coverage ratio at 2.54 times.

Looking forward, while the outlook appears stable, profitability remains susceptible to forex fluctuations and geographic concentration risks, particularly related to revenue dependency on Bangladesh. Despite these challenges, sustained management expertise and the potential for market recovery in H2FY25 underpin a cautious optimism regarding financial stability and growth.

Investors may consider a hold position, given the company’s strategic focus on operational improvements and risk management amid an evolving market landscape.